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Evening markets: crops stumble as headwinds build

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Corn and wheat ended the week on sour note, as bullish sentiment evaporated and concerns – old and new – took the spotlight.

Positive news was hard to come by. Sure, the dollar was lower, theoretically making Chicago's dollar-denominated commodities cheaper to foreign buyers.

And oil was a little stronger, up $0.14 at $67.30 a barrel for New York's September contract at 16:45 GMT, a small fillip for crops with uses as biofuels.

But these were hardly a match for the bearish forces ranged against crops, particularly with a weekend ahead, fuelling the temptation to take profits from Thursday's rally.

Acreage expectations cut back

Corn slumped 11 cents to $3.16 a bushel for Chicago's benchmark September contract, losing more than half of Thursday's gains.

The drop reflected waning hopes for a revision of plantings data expected when the US Department of Agriculture releases updated crops statistics next month, adjusted for the impact of heavy June rain on farmers' sowing plans.

Traders appeared to be reducing their expectations to a 250,000-500,000 acre drop, compared with hopes of a cut of up to 1m acres which had been floating around the market.

Furthermore, China pencilled in an auction of 2m tonnes of corn from state reserves for Tuesday.

Beans benefit

The beneficinry of corn's woes was, to a limited extent, soybeans.

Traders had wondered whether reduced corn acres would mean higher plantings of soybeans, which have a shorter growing season, and so could have been planted after fields dried up.

Chicago's August bean contract slid a modest 1.75 cents to $10.31 ¾ a bushel, although some new crop contract were less resilient, with March 2010 beans down 14.5 cents at $9.29 a bushel.

'Added more grief'

Wheat, meanwhile, was hurt by the revival of fears earlier this week that politically-backed measures to crack down on regulation would drive money out of the market – particularly the deep-pocketed index funds which sit on long positions.

"Whilst long term [new regulation] may take some of the volatility out of world wheat markets, in the short term it has just added more grief to the current bearish trend," Hugh Schryver, at Glencore, said.

September wheat lost 13.5 cents to $5.18 ¼ a bushel, with forward lots showing comparable losses.

Feed vs milling

European prices were also weaker, with London wheat for November down £1.25 at £106.00 a tonne, a 2009 low, and Paris wheat for August down E0.50 at E129.50 a tonne.

Feed wheat have suffered from reports of weather damage to German crops and rain delays to French ones – raising the prospect of yet more wheat being fit only for animal food.

Indeed, milling wheat has been on an improving trend this week.

Rising rapeseed yields

Meanwhile, Paris rapeseed continued to lose ground as European rapeseed harvests continued to beat forecasts.

"Some reports are suggesting yields on the Continent as much as 20% up," Mr Schryver said.

Indeed, Cetiom, the French oilseeds office, on Thursday forecast a record domestic crop of 5.1m-5.2m tonnes.

August rapeseed tumbled $4.25 to E261.75 a tonne, taking its losses since early June to nearly 20%.

By Agrimoney.com

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